Monday, October 8, 2018

Kerry Pechter — Guess What: America Is Rich

Warning: Ingestion of the contents of this column may cause symptoms of apoplexy and dyspepsia among disciples of classical macroeconomics, neo-liberalism, or 'deficit hawks' in the US Congress.
Do you still wonder where the Federal Reserve found the trillions of dollars it needed to bail out the banking industry back in 2008? Or how the nation could be “broke” but afford a massive corporate tax cut? Or how Uncle Sam could carry a $20-plus trillion national debt and still enjoy low borrowing costs?
Ten years after the financial crisis, a surprising number of people continue to brood over these questions. Seeking answers, about 400 of them gathered last weekend at the New School of Social Research in lower Manhattan for the Second International Conference of Modern Monetary Theory (MMT)....
Retirement Income Journal
Guess What: America Is Rich
Kerry Pechter

1 comment:

Konrad said...

“For a number of reasons, the gist of MMT isn’t easy to convey.” ~ Kerry Pechter

When our heads are filled with lies from the day of our birth, we have difficulty grasping the simplest of truths.


The following needs correction…

“Today we use credit-money. A commercial bank creates deposits out of thin air by making a loan, and when the loan is repaid that money vanishes again. Through an analogous feat of double-entry accounting, according to MMT, the government can create money for its own account at the New York Fed without taking money from anyone else.”

This is contradictory. First the writer claims that all money is created by banks as loans. [False.] Then the writer says the U.S. government creates money by crediting accounts at the New York Fed. In reality the U.S. government can instruct any bank to credit any account the U.S. government chooses. This is how people receive Social Security benefits, for example.

I don’t care for the title. Guess What: America Is Rich. The U.S. government can create money out of thin air, but average Americans are not rich.

Anyway I’m glad that MMT continues to spread.